Gov. Martin O’Malley, as part of an incredibly ambitious (hubristic?) legislative session, has proposed shifting the burden of teacher pensions from the state to the counties, a move that has been vigorously opposed by most local governments, led by Howard’s own Ken Ulman.
Initial reaction from people I’ve spoken to has been muted, if they’re even aware of the issue. Attentions are shifted by a proposed gas tax and same-sex marriage bill and this issue is sneaking by, despite the direct and long-term impact it could have on both your wallet and your children’s education.
The simple fact is that a teacher pension shift will have immediate and far-reaching impact on everything from local police patrols to the ability of the school system to attract and retain the excellent teachers the system relies upon. However, the details of the pension shift, to say nothing of Maryland’s budgetary oddities, are perilously wonky, allowing politicians, media outlets and citizens to make sweeping generalities of dubious factuality. A few facts for your consideration:
- Maryland, the state, has funded teacher pensions for eight decades.
- Maryland, the state, has mandated the current costs of the pensions, and retains considerable control over what we consider to be “local” Boards of Education. Those boards, by the by, negotiate teacher contracts. The boards, by the by, would not be on the hook to help pay for pensions.
- Although county money flows to the Boards of Education, the amount the county has to fork over is, in effect, mandated by the state thanks to Maintenance of Effort (MOE) requirements. (More on that later.)
- The shift, as currently structured, takes pension costs away from the incumbent payer (i.e., the state) which has mismanaged the program into its current condition, and forces said ill-managed plans down to the organizations with the most stretched resources and least ability to effect any kind of change in the driving costs (i.e., the counties), while continuing to burden that entity with potentially ruinous requirements from above (i.e., MOE).
To recap: The state makes a hash out of teacher pensions, decides to pass the cost on to the counties, without sharing the load with the Boards of Education that “own” teacher contracts and consume two-thirds of the Howard County budget.
How does that make sense?
(A note on MOE: The Maryland state government imposes strict guidelines on county spending on education, particularly the “maintenance of effort” requirement that forces year-to-year funding of education to remain the same on a per-pupil basis. In effect, this means counties with growing populations—like Howard—must continually, and endlessly, increase educational funding. The MOE requirement could best be characterized as a blunt instrument. It doesn’t allow for reducing inefficiencies, removing overlap or reforming bureaucracy in order to gain funding wiggle room. Throw more money at the situation, the state says, or you’re wrong. It’s completely binary, and decades after its enactment, resulted in a school system that gets great results at an extraordinarily high cost, with swollen bureaucracy and literally no motivation to reduce spending. Funding is required, by law, to go up!)
Even more worrisome, no one in this debate has found cause to worry about the potential effect on teachers. Currently, teachers are literally forced to contribute 7 percent of their earnings to the pension fund. If the shift occurs, I think it likely that these mandated contributions will continue to go up as cash-strapped counties struggle to fulfill their obligations. After all, the easiest place to find more money is via employee contributions. If the contributions rise to be in the 9–10 percent range, teachers will be effectively saving for retirement in a vehicle that no sensible financial advisor would point you toward. Combined with the social security withholdings Maryland teachers also have to contribute, 17 percent of already low salaries could be gone into a system that has proven it can’t outcompete your average 401k and stands on dubious fiduciary grounds. But teachers aren’t allowed to opt out. (And if you believe teacher pensions are some magical source of Romneyesque retirements, I invite you to play with the online pension calculator. You may be surprised.)
Current teachers enjoy a good retirement to be sure, but as contributions go up (and salaries remain stagnant), the benefit of long-term teaching in a county becomes less and less. After all, if you work in the private sector, no one tells you to give up a portion of your salary, or mandates that you help workers who came before to retire. You’re not forced to plan for your future, no matter how detrimental that may be to society down the road. Teachers, though, are told to give up larger and larger percentages of their paychecks into a political pinball machine, with no way out. In fact, O’Malley’s personal staff members don’t even have to deal with the same Byzantine system as other state employees. From Maryland Administrative Release No. 21: “Only members of the General Assembly, officials of the Governor’s Office, and certain other public officials have the option of whether or not they want to join the systems.” Good enough for the teachers, not good enough for the Governor’s Office.
It’s possible that the situation may be so swiftly headed for disaster that only complete pension reform could save it. Everyone, from the taxpayer to the teachers’ unions to every level of government would need to come to the table and reach an equitable solution. Governor O’Malley, rather than facing this difficult challenge head-on, has instead chosen to pass the buck. And our counties, our local police and firefighters and teachers, those backbones of our communities, will bear the brunt of his dodge.
That is truly a nightmare.